Welcome to The One Minute Manager. Our goal is to provide you with quick tips that will enhance the success of your practice. Within 60 seconds you will gain an idea that will increase your profitability or simply ease the burden of a difficult management issue. We hope you will find this a valuable resource.

The One Minute Manager . . . . .

This is a cautionary tale of disappearing trust funds. Our client's accountant always checked the bank activity by making an on-line enquiry via the Internet on a daily basis. One day there was an unexplained withdrawal of some $8,000. The bank was notified immediately.

The bank's first response was that there must have been a breach of the law firm's password and an internal fraud had been committed. There was little interest by the bank to pursue any further investigation. The law firm was confident that their procedures were secure and demanded further action, but this failed to escalate the issue.

In frustration, the police were contacted who responded promptly and uncovered the details of the transaction. The withdrawals related to the purchase of computers that were delivered to a Montreal address. Surprisingly, these details did not provoke any further action from the bank nor the Montreal authorities. Finally, after some pressure and under the guise of being customer friendly, the bank relented and reimbursed the law firm.

What are the lessons learned from this experience? Perhaps on-line fraud is more prevalent than we otherwise understood since the bank seemed to treat the event as rather uneventful and merely the cost of doing business. The amount taken is relatively modest to limit the attention of the bank and possibly even the customer. The banks may be reluctant to expose the weaknesses of their systems.

What is your exposure to a similar incident? Are banking transactions reviewed daily? Are your bank reconciliations current? Does a partner review the bank reconciliations? Was the trust cheque you signed payable to the Receiver General used for client purposes or fraudulently used by an insider to settle a crushing debt load?

Law firms are at a high risk for fraud by both insiders and external parties since they seldom have the rigors of strong internal controls despite the millions at risk. There is no time soon enough to review your procedures and check your fidelity insurance coverage.